The competition offering vastly superior products.

Inertia: regardless of how Wii U ultimately sells, they must remember the missed opportunities when they sat on Wii two years too long. Their basing market on types of TVs in family rooms results in the greatest possible number of consumers available to them AT the time. But this strategy needs to take into account of the now almost PC like moore's law with the TV sets. 1080p 60 refresh rate might be replaced much sooner than TV cycles of years' past. Nintendo plays the smart game, the best way to maximize profits, but they must not be so greedy as to wanting to squeeze every drop out of the lemon....Playstation was no fluke, another competing platform could easily rise and dominate again. Wii HD woulda made sense, Wii U Pro or something 2.5 years into HDtwin life cycle would still be a relatively lower cost concept but ensuring smoother transitions into Nextgen after that.

Sadly I think a lot of this is true.  Not saying the WiiU will do bad but you did make some good points is what Im saying.

In regards to Wii U, were really becoming a broken record.

At the moment I would say Nintendo's biggest obstacle is the unknown ...

While they are not as agressive as they could be, Nintendo's strategy seems to be to position themselves to capitalize on the mistakes Sony and Microsoft are likely to make. They have released their system earlier, at a reasonable price, and are trying to get cross-platform third party support with the HD consoles and if Sony or Microsoft make a mistake Nintendo is in a good position to benefit from it.

Essentially, it isn't that much different from what they did with the 3DS; and as long as the PS-Vita struggles the 3DS' position gets stronger.

The problem is that Nintendo really doesn't know what Sony or Microsoft are going to do, and they may not make any significant mistakes that benefit Nintendo.

1) Tapping into the "core" market, like Iwata himself wanted with the release of the Wii U.

This will be next to impossible without proper 3rd party support, which seems will be absent judging by the upcoming lineup. I think Nintendo rushed the Wii U, they should have waited until they had at least some big support from publishers, right now their library is void of any interesting games for the typical 360/PS3 buyer, so they won't make a dent into that segment of the market.

2) 1st party games.

They need to rethink their strategy. Releasing 1 or 2 big games per year is a waste of resources and talent and kills off the console in the long run, just like what happened with the Wii. Since 3rd party support is almost non-existant, why wait for the sales to start dying off to release big games? There needs to be a constant flow of games, and games that showcase the possibilities of things that can be done with the console as well as expanding the market. Trying out new IP's for the core and not relying always on third parties. Localizing games that will obviously sell better in the west and stop being stubborn about it, so if necessary employ more people and expand the localization team.

Software droughts
Software delays
becoming dreamcasted (users waiting for newer consoles to come out, taking away the advantage of releasing early)
decline of major square enix and capcom franchises and overuse of the ones that are valuable.
little to no western support for major titles

getting real third party support
heavy competition from two unanounced consoles
heavy competitionfrom the Wii ( i know it sounds a little stupid, but i think many people only see the Wii U as Wii 1.5 instead of a new console)

@1 - Wii U is rushed?? I feel like it came out at least one year too late.

@2 - Nintendo can't release a huge 1st party game every month or two for the next 4-5 years you know. A 3D Mario, Zelda or Metroid in HD will need a lot of time to make, especially since these guys have never dealt with HD games in the past!

Thank you. Nintendo will profit from Wii U, no doubt about it. Still, they probably have the most difficult situation out of the whole 3 companies. Sony is a close second.